12 USC 1735f14 - Civil money penalties against mortgagees, lenders, and other participants in FHA programs

(a) In general 

(1) Authority 
If a mortgagee approved under the[1] chapter, a lender holding a contract of insurance under subchapter I of this chapter, or a principal, officer, or employee of such mortgagee or lender, or other person or entity participating in either an insured mortgage or subchapter I loan transaction under this chapter or providing assistance to the borrower in connection with any such loan, including sellers of the real estate involved, borrowers, closing agents, title companies, real estate agents, mortgage brokers, appraisers, loan correspondents and dealers, knowingly and materially violates any applicable provision of subsection (b) of this section, the Secretary may impose a civil money penalty on the mortgagee or lender, or such other person or entity, in accordance with this section. The penalty under this paragraph shall be in addition to any other available civil remedy or any available criminal penalty, and may be imposed whether or not the Secretary imposes other administrative sanctions. The penalty shall be in addition to any other available civil remedy or any available criminal penalty, and may be imposed whether or not the Secretary imposes other administrative sanctions.
(2) Amount of penalty 
The amount of the penalty, as determined by the Secretary, may not exceed $5,000 for each violation, except that the maximum penalty for all violations by any particular mortgagee or lender or such other person or entity during any 1-year period shall not exceed $1,000,000. Each violation of a[2] the provisions of subsection (b)(1) of this section shall constitute a separate violation with respect to each mortgage or loan application. In the case of a continuing violation, as determined by the Secretary, each day shall constitute a separate violation. In the case of the mortgagees failure to engage in loss mitigation activities, as provided in subsection (b)(1)(I) of this section, the penalty shall be in the amount of three times the amount of any insurance benefits claimed by the mortgagee with respect to any mortgage for which the mortgagee failed to engage in such loss mitigation actions.
(b) Violations for which a penalty may be imposed 


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(1) Violations 
The Secretary may impose a civil money penalty under subsection (a) of this section for any knowing and material violation by a mortgagee or lender, as follows:
(A) Except where expressly permitted by statute, regulation, or contract approved by the Secretary, transfer of a mortgage insured under this chapter to a mortgagee not approved by the Secretary, or transfer of a loan to a transferee that is not holding a contract of insurance under subchapter I of this chapter.
(B) Failure of a nonsupervised mortgagee, as defined by the Secretary
(i) to segregate all escrow funds received from a mortgagor for ground rents, taxes, assessments, and insurance premiums; or
(ii) to deposit these funds in a special account with a depository institution whose accounts are insured by the Federal Deposit Insurance Corporation through the Deposit Insurance Fund, or by the National Credit Union Administration.
(C) Use of escrow funds for any purpose other than that for which they were received.
(D) Submission to the Secretary of information that was false, in connection with any mortgage insured under this chapter, or any loan that is covered by a contract of insurance under subchapter I of this chapter.
(E) With respect to an officer, director, principal, or employee
(i) hiring such an individual whose duties will involve, directly or indirectly, programs administered by the Secretary, while that person was under suspension or withdrawal by the Secretary; or
(ii) retaining in employment such an individual who continues to be involved, directly or indirectly, in programs administered by the Secretary, while that person was under suspension or withdrawal by the Secretary.

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(F) Falsely certifying to the Secretary or submitting to the Secretary a false certification by another person or entity.
(G) Failure to comply with an agreement, certification, or condition of approval set forth on, or applicable to
(i) the application of a mortgagee or lender for approval by the Secretary; or
(ii) the notification by a mortgagee or lender to the Secretary concerning establishment of a branch office.
(H) Violation of any provisions of subchapter I, II, or IXA (as such subchapter existed immediately before December 15, 1989) of this chapter or any implementing regulation or handbook that is issued under this chapter.
(I) Failure to engage in loss mitigation actions as provided in section 1715u (a) of this title.
(J) Failure to perform a required physical inspection of the mortgaged property.
(2) Additional violations 
The Secretary may impose a civil money penalty under subsection (a) of this section for any knowing and material violation by a principal, officer, or employee of a mortgagee or lender, or other participants in either an insured mortgage or subchapter I loan transaction under this chapter or provision of assistance to the borrower in connection with any such loan, including sellers of the real estate involved, borrowers, closing agents, title companies, real estate agents, mortgage brokers, appraisers, loan correspondents, and dealers for
(A) submission to the Secretary of information that was false, in connection with any mortgage insured under this chapter, or any loan that is covered by a contract of insurance under subchapter I of this chapter;
(B) falsely certifying to the Secretary or submitting to the Secretary a false certification by another person or entity; or
(C) failure by a loan correspondent or dealer to submit to the Secretary information which is required by regulations or directives in connection with any loan that is covered by a contract of insurance under subchapter I of this chapter.
(3) Notification to Attorney General 
Before taking action to impose a civil money penalty for a violation under paragraph (1)(D) or (F), or paragraph (2)(A), (B), or (C), the Secretary shall inform the Attorney General of the United States.
(c) Agency procedures 

(1) Establishment 
The Secretary shall establish standards and procedures governing the imposition of civil money penalties under subsection (a) of this section. These standards and procedures
(A) shall provide for the Secretary to make the determination to impose the penalty or to use an administrative entity (such as the Mortgagee Review Board, established pursuant to section 1708 (c) of this title) to make the determination;
(B) shall provide for the imposition of a penalty only after the mortgagee or lender or such other person or entity has been given an opportunity for a hearing on the record; and
(C) may provide for review by the Secretary of any determination or order, or interlocutory ruling, arising from a hearing.
(2) Final orders 
If no hearing is requested within 15 days of receipt of the notice of opportunity for hearing, the imposition of the penalty shall constitute a final and unappealable determination. If the Secretary reviews the determination or order, the Secretary may affirm, modify, or reverse that determination or order. If the Secretary does not review the determination or order within 90 days of the issuance of the determination or order, the determination or order shall be final.
(3) Factors in determining amount of penalty 
In determining the amount of a penalty under subsection (a) of this section, consideration shall be given to such factors as the gravity of the offense, any history of prior offenses (including those before December 15, 1989), ability to pay the penalty, injury to the public, benefits received, deterrence of future violations, and such other factors as the Secretary may determine in regulations to be appropriate.
(4) Reviewability of imposition of penalty 
The Secretarys determination or order imposing a penalty under subsection (a) of this section shall not be subject to review, except as provided in subsection (d) of this section.
(d) Judicial review of agency determination 

(1) In general 
After exhausting all administrative remedies established by the Secretary under subsection (c)(1) of this section, a mortgagee or lender or such other person or entity against whom the Secretary has imposed a civil money penalty under subsection (a) of this section may obtain a review of the penalty and such ancillary issues (such as any administrative sanctions under 24 C.F.R. parts 24 and 25) as may be addressed in the notice of determination to impose a penalty under subsection (c)(1)(A) of this section in the appropriate court of appeals of the United States, by filing in such court, within 20 days after the entry of such order or determination, a written petition praying that the Secretarys determination or order be modified or be set aside in whole or in part.
(2) Objections not raised in hearing 
The court shall not consider any objection that was not raised in the hearing conducted pursuant to subsection (c)(1) of this section unless a demonstration is made of extraordinary circumstances causing the failure to raise the objection. If any party demonstrates to the satisfaction of the court that additional evidence not presented at the hearing is material and that there were reasonable grounds for the failure to present such evidence at the hearing, the court shall remand the matter to the Secretary for consideration of the additional evidence.
(3) Scope of review 
The decisions, findings, and determinations of the Secretary shall be reviewed pursuant to section 706 of title 5.
(4) Order to pay penalty 
Notwithstanding any other provision of law, in any such review, the court shall have the power to order payment of the penalty imposed by the Secretary.
(e) Action to collect penalty 
If any mortgagee or lender or such other person or entity fails to comply with the Secretarys determination or order imposing a civil money penalty under subsection (a) of this section, after the determination or order is no longer subject to review as provided by subsections (c)(1) and (d) of this section, the Secretary may request the Attorney General of the United States to bring an action in an appropriate United States district court to obtain a monetary judgment against the mortgagee or lender or such other person or entity and such other relief as may be available. The monetary judgment may, in the courts discretion, include the attorneys fees and other expenses incurred by the United States in connection with the action. In an action under this subsection, the validity and appropriateness of the Secretarys determination or order imposing the penalty shall not be subject to review.
(f) Settlement by Secretary 
The Secretary may compromise, modify, or remit any civil money penalty which may be, or has been, imposed under this section.
(g) “Knowingly” defined 
The term knowingly means having actual knowledge of or acting with deliberate ignorance of or reckless disregard for the prohibitions under this section.
(h) Regulations 
The Secretary shall issue such regulations as the Secretary deems appropriate to implement this section.
(i) Deposit of penalties in insurance funds 
Notwithstanding any other provision of law, all civil money penalties collected under this section shall be deposited in the appropriate insurance fund or funds established under this chapter, as determined by the Secretary.
[1] So in original. Probably should be “this”.
[2] So in original. The word “a” probably should not appear.